Cheong Wa Dae: President Lee has often warned of a ‘real estate ruin’ scenario... Ending the capital gains tax relief is not a tax hike

According to Financial News, Kyuyoun Lee, Senior Presidential Secretary for Public Relations and Communications at Cheong Wa Dae (the Blue House), said on the 26th that President of South Korea Lee Jae Myung has long been concerned about what he calls a “real estate ruin” scenario. Lee stated that ending the temporary suspension of the heavier capital gains tax on owners of multiple homes is essentially a step toward normalization.
Appearing that day on the YouTube channel “Baek Woon-gi’s Sardine TV,” the senior secretary addressed President Lee’s post from the previous day about capital gains tax on his SNS accounts. Lee remarked, “Of course he would have had the policy office and others review it and then received a report. It is inconceivable that he acted on impulse,” explaining the background of the post.
He went on, “The President has often spoken about a ‘real estate ruin’ scenario,” adding, “I have heard him worry that ‘it feels like we are heading toward a version of Japan’s ‘lost 30 years’; what if the country staggers and falls behind because of real estate?’”
Regarding the plan to end the temporary suspension of the heavier capital gains tax, he stressed, “This is not the announcement of a new tax increase,” and continued, “If necessary, the suspension could be extended for another one or two years. However, the President believes that a situation in which it is automatically extended is abnormal.”
When the host asked, “So do you see this as part of restoring normalcy from an abnormal state as well?” Lee replied, “Yes.”
Previously, starting in May 2022, the Yoon Suk Yeol administration temporarily exempted owners of multiple homes from the additional, punitive portion of capital gains tax when selling residential properties, saying it wanted to stimulate housing transactions, and it kept extending that exemption. President Lee, however, made it clear on the 23rd and again on the 25th that there would be no further extensions.
In particular, on the 25th he conveyed his strong determination by issuing four separate messages on real estate. On SNS, referring to the end of the temporary suspension of the heavier capital gains tax on owners of multiple homes, President Lee warned, “If you assumed we would once again revise the law to extend it, you were mistaken,” reiterating that there will be no more extensions. At the same time, he said that, to minimize market confusion, the government is considering applying the suspension to sales contracts signed before the suspension expires on May 9. He also signaled the possibility of strengthening property holding taxes on owners of multiple homes.
Responding to analyses that reinstating the heavier capital gains tax on owners of multiple homes will have little effect, he countered, “If the tax you pay when you sell is lower than the tax you pay just to hold on and endure, would people really choose to hold on?”
President Lee also referred to the amendment of the Commercial Act of the Republic of Korea, which has been credited with making a major contribution to achieving his pledge of raising the Korea Composite Stock Price Index (KOSPI) to 5,000. He said, “When we pushed for amendments to the Commercial Act of the Republic of Korea to restore normalcy, businesses and others raised an uproar and resisted as if companies and the country were on the brink of collapse. But once the amendments were actually made, didn’t things improve for both companies and our national community?” He then stressed, “Escaping from a republic of unearned real estate income that is hurtling toward its own ‘lost 30 years’ will also involve much pain and resistance, but if something is necessary and beneficial, we must not shy away from it.”
He added, “When you are seriously ill, surgery is painful and costly, but the operations that must be done still have to be done. If we endure a brief period of pain, we will become healthier and earn more money in the long run.”
cjk@fnnews.com Choi Jong-geun Reporter